Investment Highlights

• We maintain our forecasts, SOP-based FV of RM3.76 (Exhibit 2) and BUY call.

• IJM’s 1QFY18 core net profit of RM127.8mil came in at only 21% and 19% of our full-year forecast and the fullyear consensus estimates respectively. However, we consider the results within expectations as we expect stronger quarters ahead, underpinned by accelerating construction billings.

• 1QFY18 core net profit jumped 17% YoY. Higher profits from construction (backed by a record order backlog), infrastructure (driven by a 73% increase in cargo throughput at the ports) and property (due to a low base previously on forex losses), more than offset weaker performance from plantation (due to a high base previously on forex gains) and manufacturing (hurt by increases in input costs).

• It currently sits on a record construction order book of RM8.7bil. During a recent analysts briefing, IJM guided for construction job wins of RM3bil in FY18F, consistent with its job wins of RM3bil in FY17 and our assumption for RM3bil job wins annually in FY18-20F. YTD (FY), it has already secured RM793mil new jobs.

• Also, it appeared confident that property sales in FY18F would match the RM1.4bil achieved in FY17. It will continue to focus on small linked homes in Rimbayu (from 20ft x 60ft and RM622,000/unit), and affordably priced high-rise residential projects in Segambut (RM500/sf) and Penang (RM800/sf). Its unbilled property sales now stand at RM1.7bil.

• We like IJM Corp as it is a good proxy to the booming local construction sector given its involvement in key infrastructure projects such as the West Coast Expressway, MRT2 and Kuantan Port Deepwater Terminal. Also, IJM is poised to garner a slice of action in the LRT3, Gemas–Johor Bahru double tracking and East Coast Rail Link, based on its forte and track record in rail projects (Seremban-Gemas double tracking, Delhi Metro, MRT1).

• IJM’s diverse business interests, spanning a wide range of sectors that also include property, plantation, building materials, toll roads and ports, should help counter sector-specific cyclical downturns, resulting in better earnings stability.

Source: AmInvest Research - 24 Aug 2017